Saturday, October 17, 2009

ABCs of Financial Aid

COA, FAFSA, EFC…the alphabet of financial terms associated with paying for college can be a source of confusion for families in the thick of the college application process. As with applying to college, navigating financial aid requires assessing the landscape. Familiarization with concepts, knowing deadlines and being organized is the key to finding success in the financial aid process too.

Here is a quick college financing primer highlighting some of the critical terms you will need to know:

The Cost of Attendance, or COA, refers to the total annual cost of college, not just tuition and fees. Don’t forget to factor in room and board, books, transportation, and other personal expenses when trying to estimate what a year of college will cost. College financial aid officers look at the total COA when they package aid awards. Most, if not all colleges, will post the COA on their website.

The Free Application for Federal Student Aid, better known as the FAFSA, is used by colleges and universities to determine eligibility for financial aid. All students must file a FAFSA in order to receive any federal student aid. This includes the non-need based unsubsidized federally guaranteed Stafford student loans, so if you anticipate borrowing for college, don’t forget to file the FAFSA. It becomes available online January 1, 2010 for the 2010-2011 school year at

The Expected Family Contribution or EFC which is calculated from the information you provide on the FAFSA is the amount determined to be what the family can and should contribute to the cost of the student’s education. The EFC is based on the family’s current assets and prior year's income, including both the student’s and parents’ financial data. After completing and submitting your FAFSA, you will receive a Student Aid Report, or SAR, which will show your EFC.

Nearly 600 schools also require that families complete the CSS/Profile form for the allocation of their institutional (non-government) funds. The CSS/Profile is administered by the College Board and can only be filed online. Families can access the Profile as early as October 1, 2009 for the 2010-2011 academic year by going to the College Board’s website:

Now that you are familiar with these terms, there are some additional things that you should know about financial aid awards:

- Your “demonstrated need” (the COA minus your EFC) won’t necessarily be the amount shown on your SAR if the college also uses the CSS/Profile or another financial aid form. These methodologies are not the same, and therefore will produce different results. Institutions allocating their resources will naturally rely on the methodology that sets a lower threshold for your financial requirements, so don’t be surprised if the aid package is less than you expected, even from schools that claim to meet demonstrated need.
- Colleges tailor the CSS/Profile formula to their specific institutional requirements. In other words, your demonstrated need may vary from school to school. For example, some colleges consider the equity in your home; others do not.
- The college offering the most financial aid may not necessarily be providing the best package. One has to look at the composition of each award. A financial aid package that meets need with grants which do not have to be repaid is far more attractive than one comprised entirely of loans.
- If your financial situation changes materially after you’ve filed the forms, such as loss of employment, you should notify the colleges immediately.

Be sure to visit the Financial Aid section of each school’s website to check on requirements, deadlines and merit aid, if awarded. Since financial aid is a limited resource, getting things in early can make a difference. The sooner you complete the FAFSA, CSS/Profile and any other required forms, the better your chances of receiving financial assistance.

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